Linking banking crises and sovereign defaults in emerging markets

Irina Balteanu, Aitor Erce 12 November 2014

a

A

The feedback loop between fiscal and financial instability has been at the core of the recent turmoil in Europe (Acharya et al. 2014). In some countries, systemic banking crises triggered fiscal distress due to the magnitude of bank rescue operations (for example, in Ireland). In others, substantial sovereign debt tensions, leading to successive sovereign downgrades, severely weakened domestic financial systems (for example, in Greece).

a

A

Topics:  Financial markets International finance Macroeconomic policy

Tags:  twin crises, debt, sovereign debt, sovereign default, banking crises, financial crisis, doom loop, Eurozone crisis, emerging markets

Where danger lurks

Olivier Blanchard 03 October 2014

a

A

Until the 2008 global financial crisis, mainstream US macroeconomics had taken an increasingly benign view of economic fluctuations in output and employment. The crisis has made it clear that this view was wrong and that there is a need for a deep reassessment.

The benign view reflected both factors internal to economics and an external economic environment that for years seemed indeed increasingly benign.

a

A

Topics:  Macroeconomic policy Monetary policy

Tags:  macroeconomics, global crisis, great moderation, rational expectations, nonlinearities, fluctuations, business cycle, monetary policy, inflation, bank runs, deposit insurance, sudden stops, capital flows, liquidity, maturity mismatch, zero lower bound, liquidity trap, capital requirements, credit constraints, precautionary savings, housing boom, Credit crunch, unconventional monetary policy, fiscal policy, sovereign default, diabolical loop, deflation, debt deflation, financial regulation, regulatory arbitrage, DSGE models

Banks, government bonds, and default: What do the data say?

Nicola Gennaioli, Alberto Martin, Stefano Rossi 19 July 2014

a

A

Recent events in Europe have illustrated how government defaults can jeopardise domestic bank stability. Growing concerns of public insolvency since 2010 caused great stress in the European banking sector, which was loaded with Euro-area debt (Andritzky 2012). Problems were particularly severe for banks in troubled countries, which entered the crisis holding a sizeable share of their assets in their governments’ bonds – roughly 5% in Portugal and Spain, 7% in Italy, and 16% in Greece (2010 EU Stress Test).

a

A

Topics:  Financial markets

Tags:  sovereign debt, financial crises, banking, banks, bonds, sovereign default, credit, bank lending, risk-weighting

Fiscal discipline in the monetary union

Charles Wyplosz 26 November 2012

a

A

Three years into the Eurozone crisis and public debts are still rising, including in the three countries currently subject to rescue programmes. More countries – Spain and Italy for sure, France quite possibly – are inching towards rescues. These nations have three things in common:

  • They share the common currency;
  • Their economies are in recession; and
  • They have adopted austerity policies.

They are also trapped in a ‘circle of impossibilities’.

a

A

Topics:  EU institutions

Tags:  sovereign default, Eurozone crisis, debt restructuring

Learning from past crises: Into the safety zone

Caroline Van Rijckeghem, Beatrice Weder di Mauro 25 September 2012

a

A

Since the lost decade of the 1980s a rich literature on financial crises has evolved, including a theoretical literature which emphasised the potential for self-fulfilling expectations within a zone of vulnerability (e.g. Krugman 1996). The empirical counterpart of this literature focused on the probability of crisis given fundamentals, but did not try to delineate the zone of vulnerability, or the complementary safety zone.

a

A

Topics:  EU policies International finance

Tags:  sovereign default, EZ crisis, sovereign debt crises

Contagion during the Greek sovereign debt crisis

Jakob de Haan, Mark Mink 23 February 2012

a

A

In the course of 2010, the financial problems of Greece became so severe that the Eurozone countries together with the IMF agreed to provide emergency loans for a total amount of €110 billion, to be disbursed over the period May 2010 through June 2013. In addition, the European Financial Stability Facility was created, which issues bonds fully guaranteed by Eurozone countries and, after an enlargement in 2011, can provide up to €440 billion in financial support to distressed member states.

a

A

Topics:  Financial markets International finance

Tags:  banks, Greece, sovereign default, news

They still don’t get it

Charles Wyplosz 25 October 2011

a

A

Editor's note: This column updates the column originally posted on 8 August 2011.

 

a

A

Topics:  EU institutions

Tags:  ECB, sovereign default, Eurozone crisis

Greece and the fiscal crisis in the Eurozone

Willem Buiter, Ebrahim Rahbari,

Date Published

Tue, 10/12/2010

a

A

Show in Editors Choice Box?

0

cepr_featured

1

Display Order

0

Display Order

-10

Partners

CEPR

Topics

Macroeconomic policy

URL

http://www.cepr.org/pubs/PolicyInsights/CEPR_Policy_Insight_051.asp

CEPR Policy Insight No.51 can be downloaded free of charge from the CEPR website here.

Tags
eurozone, bail-out, sovereign default, fiscal sustainability

Greece and the fiscal crisis in the Eurozone

The Editors 12 October 2010

a

A

The saga of the Greek public finances continues. But this time, Greece is not the only country that suffers from doubts about the sustainability of its fiscal position. Quite the contrary. The public finances of most countries in the Eurozone are in a worse state today than at any time since the industrial revolution, except for wartime episodes and their immediate aftermaths. And the problems are not confined to the Eurozone, extending to other EU member states, like the UK and Hungary, Japan, and the US.

a

A

Topics:  Macroeconomic policy

Tags:  eurozone, bail-out, sovereign default, fiscal sustainability

It takes less than a sovereign default to cause instability

Fabio Panetta, Giuseppe Grande 07 August 2010

a

A

According to many commentators a sovereign default could be the next stage of the crisis (Reinhart 2010, Rogoff 2010 and Reinhart and Rogoff 2010). Indeed, the Greek crisis has highlighted the potential contagion effects of a sovereign default. Actually, it would take much less than a large-scale debt crisis to generate instability.

a

A

Topics:  Global crisis Global economy

Tags:  Debt crisis, Fiscal crisis, sovereign default, Eurozone crisis

Pages